Friday, February 1, 2013

One Day, the Economic Truth Will Reveal Itself

Remember the days when the markets reacted appropriately to news? It's been about 6 years since Ben Bernanke decided to ignite the mother of all bull markets to avoid a deflationary death spiral brought about by crooked bankers making shitty loans. Ben has added trillions upon trillions of unbacked dollars.

Are we in a recovery? Is a recovery imminent? Of course not. I will prove that in a minute.

Today's job report came out and it was actually bad. The media of course made it sound like Happy Days as usual. Unfortunately to prove otherwise, you have to be willing to go dig for the real numbers which is always a pain in the ass.

The easiest way to gauge the health of employment is actually quite simple. Use tax revenue. In fact that is so simple- you can't massage it. Which is why the government and economists refuse to use it. Think social security withholding. That's a pretty accurate gauge.

Then we have POMO. Today is a POMO day.

Short for Permanent Open Market Operations.

The mechanism by which the Federal Reserve manipulates the stock market.
It is no secret that the Federal Reserve, and its now semi-daily interventions in market liquidity via POMO, is rather hell bent on creating the illusion that the economy is alive and well courtesy of a ramping stock market.

Each month the Federal Reserve adds 85 billion in liquidity. This extra money, created out of thin air, has to land somewhere. Since the Fed has killed any kind of return anywhere- except for US equity markets- POMO money lands there. A little over a trillion a year.

The schedule for POMO this month is outrageous. The Fed is in the market every day for the next 9 days- including today.

By the end of this year, the Fed will own 4 trillion of it's own debt.

If you ever wanted to make some easy money on a short term trade- get long on an index thru Valentine's Day this month. Sell your position on Thursday at the end of the non stop POMO. (14th) I am going to trade out of my short positions. It's just idiotic to continue to try and swim upstream against the ministers of propaganda.

When yesterday's GDP print came at -.1 on expectations of 1.2... the market didn't even budge. That was a gigantic miss and should have triggered a 300 point DJIA loss. The number would have been far worse but the government bought an extra 100 billion dollars worth of junk in Dec. and then used a ridiculously low inflation figure (.6 annualized) to keep it even more elevated. Truth be told- the GDP print was probably around -1.

So when that miss happened, the propaganda ministers were in the news doing damage control for their masters. The elite want Dow 14,000 and they will get it. In fact, as I write this- that hurdle was just cleared.

I miss the days when the market actually behaved according to credible news reports. There are many people that think the Fed can never stop QE or POMO because once they do- there will be a rush for the exits. So the alternative is to simply continue to print, to debase your currency, to fuel liquidity until such point in the future when the truth becomes self evident- hyperinflation occurs- and the party is over.

Name the last recovery that required trillions upon trillions of dollars, printed out of thin air, to be added to our economy. Go ahead. You have five seconds. {Jeopardy tune}

Answer, none.

So the answer is quite simple. If we were actually in any kind of economic recovery- the Fed wouldn't be adding a trillion a year in liquidity would it?


Anonymous said...

Brian - excellent!


Anonymous said...

I know...its fn crazy. I'm watching my stock portfolio soar...cashed in some that went up like 30% in a month,& some penny stocks alot'll be nice to be in a good cash position for when the fire sale comes...and its gonna come. of course I bought gold and silver earlier this month so I'm greatful for that...if it dips again I'll buy again. When the GDP numbers came out and the market did nothing...I was like...are you kidding me...its so obvious its rigged...and today with the unemployment numbers...unbelievable...its truly laughable. I'm hoping I will be a happy camper in 5 years...than if I just left things the way they were.

Anonymous said...

The kicker to all this B.S. is Credit Swisse released a report today that Gold may have peaked and is calling for a reversal in price. This is the biggest propaganda since the Soviet Union existed. Who believes this garbage ? Of course C.N.B.S. runs with this and of course agrees that Equities and Bonds are the best return for investors. If the american public listens to this garbage then it gets what it deserves. DISCLAIMER- I DO NOT LIKE NOR WATCH C.N.B.S. I only caught it because I was at the Dentist and it was on in the waiting area.

Anonymous said...

One day the economic truth will reveal itself? Not if the bastards currently running things have their way. My aunt will grow balls and become my uncle before that day comes along.

Anonymous said...

Thanks for verifying what I thought must be true but I didn't know enough to figure out. I'm really pissed. The Fed is f**king with us.